If Trump is going to ‘drain the swamp,’ he might start with wasteful ag subsidies.
President-elect Donald Trump’s vow to “drain the swamp” in Washington could begin with the Agriculture Department. Federal aid to farmers is forecast by the Congressional Budget Office to soar to $19 billion in 2017. Farmers will receive twice as much of their income from handouts (25%) this year as they did in 2013, according to the USDA. Whoever Mr. Trump names as his agriculture secretary should target wasteful farm programs for spending cuts.
Here are a few of the most egregious examples:
• Cotton. Incredibly, the U.S. government has paid $750 million to subsidize Brazilian cotton production since 2010. This is the result of a 2002 World Trade Organization complaint brought by the Brazilian government claiming that the U.S. unfairly subsidized cotton producers and depressed world cotton prices. The WTO justifiably ruled against the United States. To deter Brazil from imposing penalty tariffs on U.S. exports, the U.S. paid a king’s ransom to Brazil so it could perpetuate handouts to American farmers.
The federal cotton program was revised in 2014, but farmers continue reaping roughly $1.5 billion a year in aid—more than 40% of the market value of U.S. cotton production, according to a 2015 study by the International Center for Trade and Sustainable Development. The same study estimated that the U.S. program suppresses world cotton prices by up to 7%, costing foreign cotton growers up to $3 billion a year.
• Sugar. The U.S. maintains a regime of import quotas and price supports that drive U.S. sugar prices to double or triple the world price. Since 1997 Washington’s sugar policy has zapped more than 120,000 U.S. jobs in food manufacturing, according to a 2013 study by Agralytica. More than 10 jobs have been lost in manufacturing for every remaining sugar grower in the U.S.
• Peanuts. In 2002 Congress abolished the quota system that required farmers to possess a federal license to grow peanuts. Yet rather than trust free markets, Congress created a new price-support program. In 2014 Congress sharply increased peanut subsidies. Federal peanut outlays are forecast by the USDA to increase eightfold between 2015 and 2017, reaching almost $1 billion a year. As a result, the USDA is drowning in a sea of surplus peanuts that farmers dump on the government.
• Insurance. The five-year farm bill Congress enacted in 2014 replaced some direct payments to farmers with an array of so-called insurance programs. But this isn’t the type of insurance homeowners buy to protect against unforeseen, catastrophic risks. Instead, “insurance” was simply a name to continue the sludge of handouts under a new guise, providing farmers with higher prices than markets provided. The CBO estimates that crop insurance subsidies will cost taxpayers $7.5 billion next year.
• Marketing. Farm subsidies are slopped out for anything vaguely related to agriculture. The USDA’s Market Access Program, or MAP, distributes $176 million each year to underwrite foreign advertisements and promotions for favored U.S. businesses, including pet-food producers and winemakers. The program is such an obvious boondoggle that even the Obama administration sought to cut it, stating in 2010 that its “economic impact is unclear and it does not serve a clear need.”
While generous government subsidies are defended by invoking the “family farmer,” big farmers snare the vast majority of federal handouts. According to a report released this year by the Environmental Working Group, a Washington-based nonprofit research organization, “the top 1 percent of farm subsidy recipients received 26 percent of subsidy payments between 1995 and 2014.” The group’s analysis of government farm-subsidy data also found that the “top 20 percent of subsidy recipients received 91 percent of all subsidy payments.” Fifty members of the Forbes 400 list of wealthiest Americans have received farm subsidies, according to the group, including David Rockefeller Sr. and Charles Schwab.
Even without federal subsidies, the average U.S. farmer would be far more affluent than other Americans. According to the USDA, in 2015 the median farm household had a net worth of $827,307. That includes a great many residential, gentlemen and hobby farmers. The largest class of farmers—those who produce most farm products and harvest the largest share of the subsidies—have a median net worth of $2,586,000. By contrast, the median net worth for American households in 2013 was $81,200, according to the Federal Reserve.
Farm subsidies will provide one of the clearest tests of whether Mr. Trump seeks fundamental change in Washington. It is time to stop pretending that agriculture is exempt from the laws of supply and demand. The only way to fix federal farm programs is to abolish them.
Mr. Bovard is the author of “Attention Deficit Democracy” (Palgrave Macmillan, 2006).